2.26 Ark. Code R. 51-401(a)
Approved standard methods of accounting will ordinarily be regarded as clearly reflecting income. A method of accounting will not, however, be regarded as clearly reflecting income unless all items of gross income and all deductions are treated with reasonable consistency. All items of gross income subject to taxation shall be included in the gross income for the tax year in which they are received by the taxpayer, and deductions taken accordingly, unless in order to clearly reflect income such amounts are to be properly accounted for as of a different period. Refer to 1. 26-51-403(b). For instance, in a case where it is necessary to use an inventory, no other accounting method in regard to purchases and sales will correctly reflect income except the accrual method. A taxpayer is deemed to have received items of gross income which have been credited to or set apart for him without restriction. On the other hand, appreciation in value of property is not an accrual of income to a taxpayer prior to the realization of such appreciation through sale or conversion of the property.
The true income, computed under the Income Tax Act of 1929, and where the taxpayer keeps books of account, in accordance with the method of accounting regularly employed in keeping such books (provided the method so used is properly applicable in determining the net income of the taxpayer for purposes of taxation) shall in all cases be entered on the income tax return.
2.26 Ark. Code R. 51-401(a)